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CITY OF GEM LAKE, MINNESOTA SCHEDULE OF FINDINGS AND RESPONSES YEAR ENDEQ DECEMBER 31, 2019 MATERIAL WEAKNESS 2019-001- Limited Segregation of Duties Condition; Due to the small size of the City's staff, there is by definition a lack of segregation of the accounting functions that is necessary to ensure adequate internal accounting control. While we realize this scenario. is common for small entities, we are required to report.this issue and to advise that a concentration of duties and responsibilities in a limited number of individuals is not desirable from an iriterna€ control perspective. During our audit procedures, we noted a lack of segregation of duties with regards to adjusting journal entry approval, counting of cash receipts, second review of capitalized assets, review of debt ba€ances and reconciliations, and reviews of cash and investment reconciliations. Criteria, Generally,. a system of internal control contemplates. separation of duties such that no individual has responsibility to execute a transaction, have.physical access to the related assets, and have responsibility or authority to record the transaction. Effect: The City. is unable to maintain segregation of incompatible duties, Cause: The condition is due to a limited number of personnel involved in receipt arid disbursement processes. Recommendation: Controls should. be reviewed periodically and consideration given to improving the segregation of duties. In making this review, it is important to consider the benefit derived as weighed against the cost of the improvements. Management Response, Management has decided, due. to the small ,size of the City's staff, that the additional costs of implementing the necessary controls outweigh the.benefits that would be derived.. (34)